for sale by owner sign on house front lawn
  • Posted March 28, 2022

A Certified Financial Planner Discusses What to Know About Selling A Highly Appreciated Home

Selling a home is never an easy process, it takes a lot of work, there are a lot of considerations to make, and it takes time. But things only get more complicated when you are selling a home that has appreciated a huge amount since the purchase. Typically, homes grow in value over time, and over the course of many years or decades, end up profiting a pretty penny. But sometimes, due to any number of factors, a property’s value skyrockets in a very short period of time, leading to a huge return on investment. Here are a few extra tips and tricks from a certified financial planner to know when selling a highly appreciated home.

There’s a Huge Arbitrage Opportunity

The first thing that you should know about selling highly appreciated property is that you have a massive opportunity for arbitrage. Arbitrage is the process of buying an asset for a low price and immediately selling it for a higher price in a different market, benefiting from inefficiencies in the market. Once you have sold your highly appreciated property, you can use the money to purchase other homes in cheaper markets. By fixing them up or waiting a year or two in an area that is quickly going through development, you can make a huge profit again and may be part of an investment planning strategy.

You May Owe Taxes

Another important thing to know when selling a highly appreciated home is that you might owe capital gains taxes on your profit. While there is an exception for two hundred and fifty thousand dollars or five hundred thousand if you are married, any profit you make beyond that will be subject to capital gains tax. The key here is maximizing your exemption. Married couples don’t have to pay tax on the first $500,000 of gains. Use this to your advantage to avoid capital gains tax with your financial plan.

It Can Be Smarter Than Holding

The final thing to know about selling a highly appreciated home is that it can be much smarter to sell than to hold on for longer. Houses are huge investments, and many people look at them as long term holds. But if you own a property that has skyrocketed in value recently, you should analyze if you are able to make the most of it or sell. Increasing property value can lead to a huge opportunity for development and improving your property, but if you don’t have the capital, you may want to cash out while you can and repeat the process with other properties. Talking to a certified financial planner can help you with determining your plan.

Selling a home can be complicated. This only gets more complicated when you’re dealing with property that has appreciated expectations. Make sure that you are paying attention to these three factors to get the best return from your home sale.

Check out this article on situations that call for a financial advisor!

Contact Tenpath Financial Group for certified financial planning services.